Jumping the FTSE ship was a good move

Price at time of writing – 6550.

While it took a few weeks longer to arrive than I expected, the global correction in equities has at last begun.

Although the FTSE 100 missed my long-term target of 6922 by just 46 points, the decision to jump ship in late 2013 has at least been justified. Sometimes it pays not to be too cute. The FTSE is now heading lower.

The writing was on the wall for equities throughout much of January. Despite the complacent attitudes that prevailed among trend-followers, share markets were hesitating to move higher, and some choppy trading days began to emerge. The inability to break above my solitary resistance line at 6775 was the telling moment, and a triple-top has now developed around this level.

The FTSE is likely to find its first line of support at my former target band 6491-6556, the top parameter of this band being a line representing a 100% advance from the major low in March 2003. Traders may look to take advantage of this likely bounce. Ultimately, however, lower levels are likely.

I have added three new lines on today’s chart, all emanating from the recent high. They represent falls of 6.25%, 8.33% and 12.5% respectively. I will be looking for one of these percentages to become my new downside target. An 8.33% fall would take the index down to a level of 6293 and align itself with the rising 3x2 daily time-angle that originates from the unique low in March 2009.

Recommendation: sell short on an imminent rally back to 6620. The target then becomes 6293.

FTSE 100 chart

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.

Find articles by analysts